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DIRECTIVE

On effective application of the parent company-subsidiary company model

Over the past nearly 5 years, together with the reorganization, renewal and raising the efficiency of state enterprises, the pilot application of the parent company-subsidiary company model has seen positive results, having created a new model for management of enterprises on the basis of capital investment according to the market-oriented mechanism; promoted the transformation of ownership of state enterprises and raised production and business efficiency; and formed multi-ownership enterprises bound together in terms of economic benefits, etc. Despite of certain limitations, these achievements have permitted the wide application of this model in the spirit of the Resolution of the 3rd plenum of the Party Central Committee (IXth Congress). To this end, the Prime Minister hereby instructs:

1. Ministries, ministerial-level agencies, Government-attached agencies, provincial/municipal People’s Committees, and state corporations to well perform the following tasks:

a/ To expeditiously reorganize and renew state enterprises under plans approved by the Prime Minister. To strictly implement the provisions of Decree No. 187/2004/ND-CP of November 16, 2004, on transformation of state companies into joint-stock companies.

b/ To select several more corporations for equitization where the State will hold dominant shares; to preliminarily review and withdraw experience from the equitization of state corporations by the end of 2006.

c/ To work out a plan on transformation of all state corporations which satisfy all conditions for being maintained as state corporations (except those operating in the security and defense domain), and a selected number of large-sized enterprises having financial potential, doing multi-branch business, and being capable of predominating other enterprises in terms of capital, brand, technology and market, into ones operating after the parent company-subsidiary company model. Those parent companies operating in branches or domains where the State does not hold 100% capital shall be transformed into joint-stock companies or limited liability companies with two or more members.

When formulating schemes on transformation of state corporations into ones operating after the parent company-subsidiary company model, there should be roadmaps for soon transforming most of their member enterprises into joint-stock companies or limited liability companies with two or more members, and a small number of them into one-member limited liability companies. Those companies operating in branches, domains or geological areas where the State needs to hold dominant shares must be companies with dominant shares contributed by their parent companies.

d/ To complete in the first quarter of 2006 the approval of organization and operation charters and financial regulations of state companies already transformed to operate after the parent company-subsidiary company model under the Prime Minister's assignment or decentralization.

e/ To continue experimenting the model whereby managing boards sign contracts to hire talented general directors or directors to administer enterprises; to preliminarily review, and withdraw experience from, this model by the end of 2006.

f/ To strictly implement the Resolution of the 3rd plenum of the Party Central Committee, the IXth Congress, and the Prime Minister's Decision No. 180/2001/QD-TTg of November 16, 2001, on the signing of contracts with, selection, appointment, dismissal, commendation or disciplining of corporations' deputy general directors and chief accountants by state corporations' managing boards; approve the appointment, dismissal, commendation and disciplining of directors of member units for general directors to decide thereon.

Not to directly intervene in state companies' nomination of representatives of their capital portions contributed at other enterprises.

g/ To enhance propagation and dissemination of undertakings and policies for state companies and their managerial officials and employees to well understand the purposes and requirements of the transformation of state corporations or companies into ones operating after the parent company-subsidiary company model in the process of stepping up the reorganization, renewal, development, and raising the efficiency of state enterprises.

To organize training courses on transformation contents and process for managerial officials of to be-transformed enterprises.

2. Ministries to study and perfect legal grounds for the formation and development of the parent company-subsidiary company model and monitor the implementation of legal provisions, specifically:

a/ The Ministry of Planning and Investment shall, in the first quarter of 2006, amend the transformation process, ensuring closeness, rapidity and simplicity in the formulation, evaluation and approval of schemes.

b/ The Ministry of Finance:

- To review, study and supplement regulations on financial mechanisms in the parent company-subsidiary company model, then submit them to the Prime Minister for promulgation or promulgate them according to its competence.

- To monitor the formulation and implementation of financial regulations, the formulation and sending of consolidated financial statements of parent companies, and other financial matters in the parent company-subsidiary company model.

- In the first quarter of 2006, to submit to the Prime Minister regulations on transformation of state companies and state corporations' independent cost-accounting member companies into limited liability companies with two or more members; to transform one-member limited liability companies into joint-stock companies.

c/ The Ministry of Labor, War Invalids and Social Affairs shall guide the arrangement of salaries for managerial officials of companies transformed into ones operating after the parent company-subsidiary company model under the provisions of the Government Office’s Official Letter No. 4532/VPCP-VX of August 12, 2005, and guide companies to conduct review thereof according to company ranking criteria for application as from 2007.

d/ The Ministry of Home Affairs shall, in the first quarter of 2006, guide the appointment of representatives of state capital portions at joint-stock companies or limited liability companies; guide the arrangement of leading officials of equitized state companies who are not appointed as representatives of state capital portions at joint-stock companies.

3. State companies transformed into ones operating after the parent company-subsidiary company model shall have the responsibilities:

a/ Enterprises which have their transformation schemes approved should expeditiously form the parent company-subsidiary company model by stepping up reorganization and transformation of ownership of their member units; perfect the managerial apparatus of parent companies; appoint, and promulgate working regulations applicable to, representatives of parent companies' capital portions at subsidiary companies in compliance with promulgated regulations on the parent company-subsidiary company model.

b/ Enterprises which have been selected and have the approved plans on transformation and reorganization after the parent company-subsidiary company model should expeditiously formulate transformation schemes, clearly determining the structures and modes of transformation and legal forms of the parent company and each subsidiary company or associate company, then submit them to competent authorities for approval.

c/ To provide training to raise managerial capabilities for managerial officials of parent companies, especially their capabilities to invest and manage finance in other enterprises; raise business administration skills for parent companies and subsidiary companies.

4. The Steering Committee for Enterprise Renewal and Development shall have the responsibilities:

- To inspect, urge, guide, monitor and periodically report to the Prime Minister on the transformation of state companies into ones operating after the parent company-subsidiary company model.

- To coordinate with ministries, branches, localities and enterprises in timely detecting problems or irrationalities in the course of implementation, propose the Prime Minister to direct the handling thereof or propose agencies to handle them according to their competence.

- To consult the Central Party Commission for Organization and the Vietnam Labor Confederation in guiding the operation of Party organizations and trade unions in the parent company-subsidiary company model.

- To monitor and periodically report to the Prime Minister on the implementation of this Directive.

Ministers, heads of ministerial-level agencies, heads of Government-attached agencies, presidents of provincial/municipal People's Committees, the Steering Committee for Enterprise Renewal and Development, and managing boards of state corporations shall have to implement this Directive.